Daily Comment (September 14, 2021)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Good morning and happy CPI day!  We cover the data below, but the quick read is that prices rose less than expected, lifting equity futures, which were leaning higher before the reportTropical Storm Nicholas has hit the Texas coast, dumping prodigious amounts of rain.  The storm track is taking it toward Louisiana.  Our coverage begins with the New York Fed’s inflation survey, followed by an update on the uranium market and Facebook (FB, USD, 376.51).  Our regular coverage begins with China news.  Bond market jitters continue.  The international roundup is next; the center-left wins in Norway.  We close with pandemic coverage.

NY Fed and Inflation:  The New York FRB conducts a survey of consumer behavior and outlooks, and its recent polling on inflation expectations is sobering.  The overall inflation expectation for one year out is 5.2%; the three-year rate is 4.0%.  Older Americans (over 60) are most concerned, forecasting a 6.0% rate over the next 12 months.  But even the under 40 bracket is looking for 4.5%.  Check out the above link for the breakdown by education, age, and region.  The bottom line for the Fed is that inflation expectations are rising, and the central bank’s only real tool to address it is to weaken aggregate demand, which we doubt it will do.

Uranium on a tear:  We have been friendly to uranium on the idea that, eventually, it will become obvious that you can’t achieve a carbon-free energy sector without nuclear power.  That doesn’t mean nuclear power isn’t without its externalities, but so does every other power source.  The uranium market isn’t huge.  Much of the production and consumption is tied to long-term contracts, meaning the spot market is even smaller than it looks.  In such situations, a small amount of buying can lead to price spikes.  Investor interest appears to be high, and that has sent prices up sharply.  We don’t know how long it will last, but over the long run, we suspect prices will remain higher than seen in recent years.

Facebook (FB, USD, 376.51):  In the spirit of Animal Farm, it turns out that all animals are equal, but some are more equal than others.  A WSJ report reveals that the social media company does not screen all Facebook users the same.

 China:  Evergrande (EGRNF, USD, 0.46) remains in the news.

International roundup:  Labor wins in Norway, the Peronists don’t win in Argentina, and Lebanon gets aid.

COVID-19:  The number of reported cases is 225,359,152, with 4,641,746 fatalities.  In the U.S., there are 41,223,105 confirmed cases with 662,252 deaths.  For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high-frequency data on various factors.  The CDC reports that 456,755,755 doses of the vaccine have been distributed, with 380,831,725 doses injected.  The number receiving at least one dose is 209,701,005, while the number receiving second doses, which would grant the highest level of immunity, is 178,982,950.  For the population older than 18, 65.0% of the population has been vaccinated.  The FT has a page on global vaccine distribution.

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